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The challenges involved in making and using Lasting Powers of Attorney

Annmarie Forster, associate solicitor, BDB Pitmans, 02/08/2022


Lasting Powers of Attorney (LPAs) are a valuable part of estate planning for clients of all ages. There are two types of LPA, one for property and financial affairs and one for health and welfare. Under a property and finances LPA the attorney can help with, for example, day-to-day banking or help with bigger decisions like selling a property, and can be used whether or not the donor has mental capacity.

A health and welfare LPA can only be used if the donor has lost capacity and, importantly, allows the attorney to step into the donor’s shoes and authorise or refuse medical treatment on their behalf. Both documents are incredibly useful as they allow the donor to choose the people who will manage their affairs if they are no longer able to. If a person has lost mental capacity, and they have not made a LPA, an application to Court of Protection must be made before anyone can take over management of their affairs.

To complete the LPA forms the donor must choose one or more people to be their attorneys and nominate a third party ‘certificate provider’ who signs the LPAs to confirm that the donor understands the effect of making the LPAs and that they are not under undue pressure to sign the documents. Once the forms are signed in the specified order the LPAs are sent to the Office of the Public Guardian (OPG) for registration. 

The current system for making and using LPAs has been in place since October 2007 and in 2021 the Ministry of Justice ran a consultation entitled ‘Modernising Lasting Powers of Attorney’. This looked at how to improve the system whilst retaining safeguards against abuse of LPAs. The UK government’s response to the consultation, published in May 2022, resulted in seven proposals for change which include: reviewing how signatures on LPAs are witnessed; considering how to avoid errors in LPAs prior to registration; reviewing how people can object to LPAs being registered; reviewing the timescales for registering LPAs; and considering how solicitors can access the OPG’s systems.

Whilst it is promising that the government is looking at updating the system, the proposed changes do not address some of the other difficulties which can occur when making, registering and using LPAs.

Making a LPA

Donors have two options for making LPAs. They can use the OPGs online ‘self-service’ system, or they can take legal advice and have the documents drafted by a professional who can tailor the LPAs to meet their individual needs.

The first area which can cause difficulty is deciding how to appoint attorneys.  Donors have three options when appointing more than one attorney. Attorneys can be appointed jointly, jointly and severally or jointly for some decisions and jointly and severally for others. A donor who has not taken legal advice may think that the simplest option is to appoint their attorneys jointly.

However, if attorneys are appointed jointly and one of them becomes unable to act (for example, because they have died) this renders the LPA unusable because the remaining attorney cannot act on their own. It is therefore usually more appropriate for donors to appoint their attorneys jointly and severally. The benefit of this is that attorneys are able to act individually in an emergency situation and if one of the attorneys can no longer act, the other can continue to act alone. 

Another area which can cause difficulty is that the LPA forms enable donors to include preferences and instructions about how the LPAs are used. A preference is an expression of wishes whereas an instruction creates an obligation on the attorney. The inclusion or omission of such clauses can have serious consequences, first on whether the LPA can be registered and, secondly, on the attorney’s ability to manage the donor’s affairs.

First, the OPG has the power to strike out preferences and instructions if they are unworkable or would prevent the attorney from acting in the best interests of the donor. Examples of clauses that have been struck out include an instruction that attorneys make financial provision for a family member and an instruction that attorneys allow a family member to live in the donor’s home. A professional adviser can guide a donor on the drafting of preferences and instructions to avoid problems.

Secondly, and particularly in relation to finance LPAs, if certain instructions are omitted there is a risk that the management of the donor’s finances will be interrupted. The OPG’s current guidance states that unless the LPA contains a specific instruction, attorneys are not allowed to delegate management of the donor’s assets. This means that they are not permitted to instruct a discretionary investment manager to manage a donor’s share portfolio. Consequently, the attorney would need to authorise every share transaction which would be impractical and may not be permitted under the investment mandate.

However, in March 2022, the OPG agreed to review its guidance so that express authority will no longer be needed to enable the attorney to instruct a discretionary portfolio manager. This is helpful as lay donors were unlikely to be aware of the need to give express permission in these circumstances.

Whilst it is useful that the guidance is changing, it is important that financial organisations are aware of this as there is a risk that portfolio managers will continue to refuse to provide discretionary management services to attorney where there is no express instruction in the LPA, thereby disrupting the donor’s financial arrangements.

Registration delay

It is currently taking up to 20 weeks to register a LPA assuming there are no errors in the application. This is partly because the OPG is required to wait four weeks after receipt of the LPA to allow interested parties to object to the registration but the Covid-19 pandemic has introduced further delay and, as well as being a source of frustration, this can cause significant difficulty for attorneys. 

Take, for example, an elderly donor whose LPAs are sent for registration after they have lost capacity (there is currently no obligation to register LPAs immediately after signing). Whilst they are waiting for the LPAs to be registered, the attorneys are unable to access the donor’s funds to pay care fees or make medical decisions which may become urgent if the donor’s health declines.

The government’s consultation recognised that the registration system needs to be quicker, but confirmed that a fast-track service would not be introduced. Where registration becomes urgent there is no way of expediting the application and so donors should be advised to apply for registration as soon as the LPA is signed.

Using LPAs

Completing the registration process is often only the first hurdle because there is a lack of consistency in how financial institutions deal with LPAs. 

Rather than providing the original LPA to each financial institution, organisations should accept a certified copy of the LPA, which is a copy signed on every page with specified wording.  Whilst some banks will add an attorney to an account mandate on receipt of a certified copy of the LPA, some banks require the donor and attorney to attend the bank in person with the original LPA before they will recognise the attorney’s authority. Others require the donor to complete an additional consent form.  This lack of consistency causes additional stress and potential confusion for donors and attorneys.

Attorneys also often encounter problems when trying to use online banking. It is common for a donor to be unfamiliar with online banking but their attorney may be more familiar with online and telephone banking. However, some banks routinely refuse to allow attorneys to use online banking if the donor did not use the service. This is put forward as an anti-fraud safeguard, but it can make managing the donor’s finances significantly more time consuming for the attorneys.

Conclusion

It is promising that the UK government is planning to update the LPA system, but the proposed changes do not address all of the difficulties encountered when making and using LPAs. Even sophisticated donors are unlikely to be aware of the traps which can arise when preparing and using LPAs so professional advisers can certainly add value to the process by tailoring the LPAs to the donor’s needs and highlighting the potential pitfalls.

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